Individual Voluntary Arrangements – The facts

If you’re one of those people struggling to pay your debts every month, and you’re sick and tired of receiving phone calls from creditors and final demand letters through the post, it’s time to stop worrying and start taking control of your finances.

I know what you’re thinking, “That’s easy for you to say!”

Harrington Brooks have been dealing with people suffering from debt for over 12 years. We’ve seen it all and dealt with possibly every issue there is, so take it from me when I say we know what we’re talking about. It’s estimated there are over 10 million people in debt in the UK and Harrington Brooks are currently looking after over 35000 people who are in a similar position as you are.

This articletalks about ways of taking control of your debts and becoming debt free.So where do we start. My other articles cover Debt consolidation, Debt management plans, and Bankruptcy, but this article explains how Individual Voluntary Arrangements (IVA’s) work and how you could benefit from them.

The first thing I want you to realise is this;

Whichever route you go down, it’s going to take time and you will probably have to sacrifice some of your favourite luxuries for a while, but in the end, if you follow the right advice YOU WILL become DEBT FREE and YOU WILL be able to take control of your finances.

So what is an Individual Voluntary Arrangement (IVA)

In order to enter an IVAyour debts would be in the region of £15000 or more and you can’t afford to meet your monthly repayments.You must agree to pay a specific amount every month over the next 60 months. If you stick to this agreement your creditors will wipe out any outstanding debt from your account, potentially saving you thousands of pounds and you will be completely debt free, giving you the freedom to move on with your life. Some creditors may even freeze the interest on your debts making it easier for you to pay, although they are not obliged to do so. Five years might seem a long time but in the scheme of things it isn’t that long and you will be paying an agreed affordable amount every month.

You see, your creditors know they will find it difficult to collect payments from you, but they are obliged to continue to chase these debts. Every time you miss a payment more interest is accumulated to your account, placing you in even more in debt. So by entering an IVA you are making a commitment to reduce your debts by making regular payments to your creditors.

Now, you could try doing this yourself and there is support available to assist you with this, or you could go down the paid route and hire a debt management company to look after the entire process, which in my opinion is the simplest way to take control of your debts.

OK, so how will a debt management company help me?

If you use a debt management company to manage your debts they will take you through the entire process in a logical manner. They should be experienced and will have been through this before with many other people suffering from debt and you will find they are very sympathetic to your situation.

Firstly they will assess your finances and debt levels to ensure you qualify for an IVA. There’s a certain criteria you will have to meet but if you are successful they will complete an income and expenditure form that takes in to account all your current outgoings and debts to work out how much you can realistically afford to pay each month. You will need to provide proof of your earnings and debts to help build your case.

Next, your IVA advisor will negotiate with all your creditors, proving to them how much you can afford. Some debt management companies have good relationships with creditors and as such may even get the interest charges frozen on your account, however they are not obliged to do this by law so don’t expect this to happen

Once all negotiations have been agreed and your IVA accepted you will make one single payment to your IVA management company who will distribute this to all your creditors on your behalf. All you have to do is make sure you have enough cleared funds in your bank account to cover your monthly payments.

Now here’s the bonus.

When your creditors have accepted your IVA they are not allowed to contact you to chase your debts BY LAW. They have to leave you alone and allow you to get on with your life as long as you are making your agreed payments. Now let’s be realistic about this. At the start of your IVA there may be occasions where letters have already been sent out demanding payments or perhaps one of your creditors has forgotten to take you off their list of debtors to chase but all you have to do is inform your IVA advisor who will contact the creditors to remind them of their duty to leave you alone. Then you can live your life in peace knowing your debts are being taken care of, and don’t forget that any outstanding debt left after five years will be wiped out.

Hmm, this sounds pretty good but I have a few more questions.

  • What will my monthly payments be?The amount you will need to pay will be calculated by taking in to account your current income, your debts and your monthly expenditure so it will be different from case to case. Rest assured that you will only be successful with your IVA application if you are able to afford your payments.
  • Will I lose my belongings? An IVA is different than bankruptcy so you will not lose your belongings if you take out an individual voluntary arrangement. However, if you own multiple properties you may be expected to sell them to cover your debts as the costs of running multiple homes is not essential for usual daily living.
  • Will my creditors look down on me for applying for an IVA? This isn’t something you should worry about. You are agreeing to make a conscious effort to pay off as much of your debt as you can afford over a five year period so your creditors will see you are making a commitment to pay them on a regular basis.
  • What happens when my IVA period is over? After your 60 month IVA is complete you will be completely debt free as long as you haven’t entered any other credit agreement over that period. You can hold your head up high knowing you have done your best to take control over your finances.

So, do you think an Individual Voluntary Arrangement is the right option for you? Read more in our series of articles to check out the other ways of taking control of your finances and becoming debt free.